The revision was mainly about the DVD part of the business -- Netflix dropped subscriber expectations from 15 million to 14.2 million for the quarter. It also lowered streaming subscriber expectations slightly, from 22 million to 21.8 million.

Netflix dramatically raised prices for DVD-plus-streaming customers in July, and this has apparently driven some customers away. But a lot of analysts argued the loss of DVD customers isn't that bad -- it actually means that Netflix is taking bold steps to avoid the classic innovator's dilemma, and cannibalizing its current successful business to bet on the future.

In his blog post announcing the change, Hastings apologized for the way Netflix announced the changes: "members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes."

He also explained gave a good explanation of why Netflix is doing this -- it doesn't want to become the next AOL or Borders:

Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.

When Netflix is evolving rapidly, however, I need to be extra-communicative. This is the key thing I got wrong.

By the way, the Qwikster envelopes will still be red. Only the logo will change.